Estimate residential rental depreciation, entered operating deductions, taxable rental income, and possible tax savings before limitation rules.
The Rental Property Tax Deduction Calculator validates every input, normalizes monthly and annual amounts, and calculates building basis, residential depreciation, operating deductions, and taxable rental income from one consistent scenario.
Building basis B = purchase price × (1−land share). Simplified full-year depreciation = B/27.5. Total deductions D = depreciation + entered mortgage interest, property tax, repairs and other expenses. Modeled taxable rental income = gross rent − D.
At a $350,000 purchase and 20% land allocation, building basis is $280,000 and annual depreciation about $10,181.82. Adding $26,000 cash expenses gives $36,181.82 deductions; against $30,000 rent the modeled tax result is a $6,181.82 loss.
Content and calculation reviewed:
Understand the calculation
Progressive tax is a piecewise-linear function. Passing a threshold changes the rate on the next slice, not on all earlier income. A deduction therefore often saves approximately deduction × marginal rate, but the exact saving can span several brackets. A credit instead subtracts from the computed tax, subject to its own restrictions.
Taxable income = max(0, income − allowed deductions) Tax = Σ(income slice in bracket × bracket rate) Tax after credit = max(0, tax − credit)
The detailed guide adds variable definitions, a reproducible example, a practice question and model limitations.